Retirement is a major financial challenge even for the most disciplined savers. While you will likely benefit from Social Security payments, you may not have any other form of guaranteed lifetime income. That means you may need to fund much of your retirement expenses with savings.
One of the biggest challenges retirees face is funding a retirement that could potentially span decades. People are living longer than ever. If you retire in your early 60s, it’s possible that your retirement could last 30 years. In fact, you may spend more time in retirement than you did saving for retirement.
If you’re like many people, the last thing you want is to run out of money in the later years of retirement. The good news is there are planning steps you can take today to minimize that risk. Below are three strategies to help you make sure your money lasts as long as you need it:
Create a projected budget.
Do you have a retirement budget? Do you know what your spending will look like after you retire? If you haven’t taken the time to develop a projected budget for your golden years, now may be the time to do so.
Start by listing all of your projected expenses, both fixed costs and discretionary ones. You may not know those exact costs right now, but make the best estimate possible. Add up your costs and then subtract the amount of income you expect to get from Social Security, pensions and more.
The remainder is the amount of expenses you will need to fund with distributions from your savings. If you will need to withdraw a high percentage of your savings every year to fund those costs, you could be in danger of running out of money. Look for ways to either boost your savings or cut your retirement expenses.
Maximize your guaranteed* income.
Another strategy for making sure your funds last is to maximize your guaranteed lifetime income. Nearly all retirees benefit from Social Security, which pays income that’s guaranteed for life. You also may be fortunate enough to have guaranteed pension payments.
You can use other strategies to create additional streams of guaranteed income. For instance, annuities offer a range of methods to convert some of your savings into a guaranteed income source. If you generate additional guaranteed lifetime income, you may need to take less in distributions from your retirement accounts.
Include health care costs in your budget.
Many retirees assume that Medicare covers all health care costs. That assumption is usually wrong. Medicare can be a valuable benefit, but it often covers only a portion of health care expenses, and it may not cover some at all.
One serious medical event can trigger a substantial amount of out-of-pocket expenses that can quickly drain your savings. You can minimize that risk by contributing to a health savings account (HSA) that allows you to pay for medical costs in a tax-efficient manner. You also may want to consider a supplemental Medicare policy to provide additional protection.
Ready to develop a strategy to make your retirement savings last? Let’s talk about it. Contact us today at TB Financial. We can help you develop a plan. Let’s connect soon and start the conversation.
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
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